Powell's return to more hawkish triggered bond marekt moves:
- the 2 year UST yield rose more than 10 basis points, above 5%, not seen since 2006
- the 10 year is under 4%
- this meant the spread between the 2s and 10s, at more than 100bp, hit its deepest inversion since September 1981
The yield curve "inverts" when yields on shorter-maturity notes exceed that of longer-dated ones. It suggests expctations are high for even more restrive monetary policy:
- markets are pricing even further Fed rate hikes, the probability of a 50bp rate hike at the upcoming March meeting rose above 50%
The inversion is also used as an indicator of a recession. Admittedly its been signalling this for months and months and so far, nope..
---
ICYMI:
- Forexlive Americas FX news wrap 7 Mar: Powell leans toward an acceleration toward 50 bps
- BlackRock says Federal Reserve could hike rates to 6%, hold for an extended time there
---
